2009-10-23 22:20:01 -

Fitch Ratings has downgraded to 'D' from 'B' the rating on the $35 million convention center facilities excise tax revenue bonds, series 2005 (taxable) of the Industrial Development Authority (IDA) of the County of Yavapai, Arizona. Fitch originally assigned an 'A-' rating to the bonds on Nov. 1, 2005, and subsequently downgraded the bonds to 'B' on May 30, 2008. Bond proceeds were used to construct a 5,000-seat convention and events center in Prescott Valley.

The 'D' rating indicates failure to make payment of principal and/or interest under the contractual terms of the rated obligation. Fitch will maintain this rating for 30 days, at which time Fitch may withdraw the rating if there has been no change in the payment status

on the bonds.

Fitch takes this action in response to non-payment of interest due to investors on Oct. 1, 2009, as reported by Well Fargo Bank, NA serving as trustee. The trustee did not make the payment despite the fact that sufficient funds had been transmitted. The trustee took this action at the direction of the majority bondholder, Allstate Life Insurance Company, so that counsel for the bondholders and the trustee can use these funds to pursue legal action related to the series 2005 offering.
Allstate, Wells Fargo, and the retail bondholders have filed separate lawsuits against the various parties associated with the series 2005 bonds (including the authority, the Town of Prescott Valley, the project developers and legal and financial consultants), charging, among other things, misrepresentation and failure to disclose material facts regarding the feasibility of the project.

On May 30, 2008 Fitch downgraded the series 2005 bonds to 'B' from 'A-' as a result of a technical default. Prescott Valley Events Center LLC (the borrower) did not transmit funds required for the Oct. 1, 2007 debt service payment on the bonds. The trustee then drew upon the debt service reserve fund in the amount of $1.17 million to make the required payment. The trustee reported these events to bondholders, along with the borrower's reported failure regarding other obligations. According to the trustee, sufficient funds were transferred for the April 1, 2008, Oct. 1, 2008 and April 1, 2009 debt service payment on the bonds.
However, the debt service reserve fund has not been replenished.

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Fitch RatingsSteve Murray, +1-512-215-3729 (Austin)Jose
Acosta, +1-512-215-3726 (Austin)Media Relations:Cindy
Stoller, +1-212-908-0526 (New York) cindy.stoller@fitchratings.com : mailto:cindy.stoller@fitchratings.com